Glycine From India, Japan, and Korea

Investigation Nos. 731-TA-1111-1113 (Preliminary)

Publication 3921 May 2007

Washington, DC 20436

U.S. International Trade Commission

COMMISSIONERS

Daniel R. Pearson, ChairmanShara L. Aranoff, Vice Chairman

Deanna Tanner OkunCharlotte R. Lane

Irving A. WilliamsonDean A. Pinkert

Robert A. RogowskyDirector of Operations

Staff assigned

Russell Duncan, Investigator Philip Stone, Commodity-Industry Analyst

Amelia Preece, EconomistJustin Jee, Accountant

Charles St. Charles, AttorneyMara Alexander, Statistician

Diane Mazur, Supervisory Investigator

Address all communications toSecretary to the Commission

United States International Trade CommissionWashington, DC 20436

U.S. International Trade CommissionWashington, DC 20436

www.usitc.gov

Glycine From India, Japan, and Korea

Investigation Nos. 731-TA-1111-1113 (Preliminary)

Publication 3921 May 2007

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CONTENTS

Page

Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Views of the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Separate and Additional Views of Chairman Daniel R. Pearson and Commissioner Deanna Tanner Okun Concerning Bratsk Aluminum v. United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Part I: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1Statutory criteria and organization of report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1U.S. market summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-2Summary data and data sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3Previous and related investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3Nature and extent of alleged sales at LTFV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3The subject product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4

Commerce’s scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4U.S. tariff treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4

The domestic like product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-5Physical characteristics and uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6Manufacturing processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8Interchangeability and customer and producer perceptions . . . . . . . . . . . . . . . . . . . . . . . . . . I-9Channels of distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9Issues in a semi-finished product analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10

Part II: Conditions of competition in the U.S. market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1Market characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1Supply and demand considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-2

U.S. supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-2U.S. demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-3

Substitutability issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-4Comparisons of domestic product, subject imports, and nonsubject imports . . . . . . . . . . . . . II-5

Part III: U.S. producers’ production, shipments, and employment . . . . . . . . . . . . . . . . . . . . . . . . . . III-1U.S. producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1U.S. capacity, production, and capacity utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1U.S. producers’ shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-3U.S. producers’ imports and purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-5U.S. producers’ inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-5U.S. producers’ employment, wages, and productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-6

Part IV: U.S. imports, apparent U.S. consumption, and market shares . . . . . . . . . . . . . . . . . . . . . . IV-1U.S. importers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1U.S. imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-2U.S. shipments of imports by grade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-6Negligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-6Apparent U.S. consumption, U.S. market shares, and ratio of imports to U.S. production . . . . . IV-6

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CONTENTS--Continued

Page

Part V: Pricing and related information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1Factors affecting prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1

Transportation costs to the U.S. market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1U.S. inland transportation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1

Pricing practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-3Pricing methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-3Sales terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-3

Price data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-4Price trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-4Price comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-4

Lost sales and lost revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-5Part VI: Financial condition of U.S. producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1Operations on glycine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1Capital expenditures, R&D expenses, and investment in productive facilities . . . . . . . . . . . . . . VI-2Assets and return on investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-3Capital and investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-3

Part VII: Threat considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-1The industry in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-2The industry in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-5The industry in Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-6U.S. importers’ inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-6U.S. importers’ current orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-6Antidumping and countervailing duty orders in third-country markets . . . . . . . . . . . . . . . . . . . . VII-7Information on nonsubject sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-7

“Bratsk” considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-7Nonsubject source information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-7

Appendixes

A. Federal Register notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1B. Conference witnesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1C. Summary data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

Note.–Information that would reveal confidential operations of individual concerns may not be publishedand therefore has been deleted from this report. Such deletions are indicated by asterisks.

1 The record is defined in sec. 207.2(f) of the Commission’s Rules of Practice and Procedure (19 CFR § 207.2(f)). 2 The imported products subject to investigation also include sodium glycinate which is provided for insubheading 2922.49.80 of the HTS.

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UNITED STATES INTERNATIONAL TRADE COMMISSION

Investigation Nos. 731-TA-1111-1113 (Preliminary)GLYCINE FROM INDIA, JAPAN, AND KOREA

DETERMINATIONS

On the basis of the record1 developed in the subject investigations, the United States InternationalTrade Commission (Commission) determines, pursuant to section 733(a) of the Tariff Act of 1930 (19U.S.C. § 1673b(a)) (the Act), that there is a reasonable indication that an industry in the United States ismaterially injured by reason of imports from India, Japan, and Korea of glycine, provided for in statisticalreporting number 2922.49.4020 of the Harmonized Tariff Schedule of the United States (HTS),2 that arealleged to be sold in the United States at less than fair value (LTFV).

BACKGROUND

On March 30, 2007, a petition was filed with the Commission and Commerce by GEO SpecialtyChemicals, Inc., Lafayette, IN, alleging that an industry in the United States is materially injured byreason of LTFV imports of glycine from India, Japan, and Korea. Accordingly, effective March 30,2007, the Commission instituted antidumping duty investigation Nos. 731-TA-1111-1113 (Preliminary).

1 19 U.S.C. § 1673b(a); see also, e.g., Co-Steel Raritan, Inc. v. United States, 357 F.3d 1294 (Fed. Cir. 2004);American Lamb Co. v. United States, 785 F.2d 994, 1001-1004 (Fed. Cir. 1986); Aristech Chemical Corp. v. UnitedStates, 20 CIT 353, 354 (1996). No party argued that the establishment of an industry is materially retarded byreason of the allegedly unfairly traded imports. 2 American Lamb, 785 F.2d at 1001 (Fed. Cir. 1986); see also Texas Crushed Stone Co. v. United States, 35 F.3d1535, 1543 (Fed. Cir. 1994). 3 CR at I-7, PR at I-6. 4 CR at I-8 - I-9, PR at I-6, I-7; CR/PR at Tables I-2, III-4, IV-3. 5 CR/PR at Tables III-4, IV-3. 6 CR at I-8, PR at I-6 - I-7; CR/PR at Tables III-4, IV-3. 7 CR at I-8 - I-9, PR at I-6, I-7. Metal complexing is the preparation of metal to permit better binding with othercompounds, such as a silicon coat. 8 CR/PR at Tables III-4, IV-3.

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VIEWS OF THE COMMISSION

Based on the record in the preliminary phase of these investigations, we find that there is areasonable indication that an industry in the United States is materially injured by reason of glycineimported from India, Japan, and Korea that is allegedly sold in the United States at less than fair value(“LTFV”).

I. THE LEGAL STANDARD FOR PRELIMINARY DETERMINATIONS

The legal standard for preliminary antidumping and countervailing duty determinations requiresthe Commission to determine, based upon the information available at the time of the preliminarydetermination, whether there is a reasonable indication that a domestic industry is materially injured,threatened with material injury, or whether the establishment of an industry is materially retarded, byreason of the allegedly unfairly traded imports.1 In applying this standard, the Commission weighs theevidence before it and determines whether “(1) the record as a whole contains clear and convincingevidence that there is no material injury or threat of such injury; and (2) no likelihood exists that contraryevidence will arise in a final investigation.”2

II. BACKGROUND

Glycine, also known as aminoacetic acid, is a naturally occurring amino acid that is manufacturedand commercially sold as a free-flowing crystalline solid.3 Glycine is typically sold in three grades: pharmaceutical, United States Pharmacopeia (“USP”), and technical. Most glycine is manufactured asUSP grade material for use in consumable or cosmetic applications as a sweetener/taste enhancer andbuffering agent. The primary markets for USP grade glycine are as an additive in pet food, animal feed,and antiperspirants.4 USP grade sales account for approximately 80 to 85 percent of the U.S. market forglycine.5 Pharmaceutical grade glycine is produced for use in some pharmaceutical applications, such asintravenous injections, where the customer’s purity requirements often exceed the minimum requiredunder the USP grade designation. Pharmaceutical grade glycine is often produced to proprietaryspecifications and is typically sold at a premium over USP grade glycine.6 Technical grade glycine,which may or may not meet USP grade standards, is sold for use in industrial applications; e.g., as anagent in metal complexing and finishing.7 Technical grade glycine is typically sold at a discount to USPgrade glycine.8

Precursors of dried crystalline glycine, including glycine slurry (i.e., glycine in a non-crystallizedform) and sodium glycinate (i.e., glycine salt), are covered by these investigations although there are

9 CR at I-5 - I-6, 1-15; PR at I-4, I-11; Conference Transcript at 29-30. 10 19 U.S.C. § 1677(4)(A). 11 19 U.S.C. § 1677(4)(A). 12 19 U.S.C. § 1677(10). 13 See, e.g., NEC Corp. v. Department of Commerce, 36 F. Supp. 2d 380, 383 (Ct. Int’l Trade 1998); NipponSteel Corp. v. United States, 19 CIT 450, 455 (1995); Torrington Co. v. United States, 747 F. Supp. 744, 749 n.3(Ct. Int’l Trade 1990), aff’d, 938 F.2d 1278 (Fed. Cir. 1991) (“every like product determination ‘must be made onthe particular record at issue’ and the ‘unique facts of each case’”). The Commission generally considers a numberof factors including: (1) physical characteristics and uses; (2) interchangeability; (3) channels of distribution; (4)customer and producer perceptions of the products; (5) common manufacturing facilities, production processes, andproduction employees; and, where appropriate, (6) price. See Nippon, 19 CIT at 455 n.4; Timken Co. v. UnitedStates, 913 F. Supp. 580, 584 (Ct. Int’l Trade 1996). 14 See, e.g., S. Rep. No. 96-249 at 90-91 (1979). 15 Nippon Steel, 19 CIT at 455; Torrington, 747 F. Supp. at 748-49. See also S. Rep. No. 96-249 at 90-91 (1979)(Congress has indicated that the like product standard should not be interpreted in “such a narrow fashion as topermit minor differences in physical characteristics or uses to lead to the conclusion that the product and article arenot ‘like’ each other, nor should the definition of ‘like product’ be interpreted in such a fashion as to preventconsideration of an industry adversely affected by the imports under consideration.”). 16 See, e.g., USEC, Inc. v. United States, Slip Op. 01-1421 (Fed. Cir. April 25, 2002) at 9 (“The ITC may notmodify the class or kind of imported merchandise examined by Commerce.”); Algoma Steel Corp. v. United States,

(continued...)

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currently no commercial markets for these products in the United States. Glycine and glycine slurry areprovided for under statistical reporting number 2922.49.4020 in the Harmonized Tariff Schedule of theUnited States (“HTS”) and sodium glycinate is properly classified under subheading 2922.49.80 of theHTS.9

The petition in these investigations was filed on March 30, 2007, by GEO Specialty Chemicals,Inc. of Lafayette, Indiana (“Petitioner” or “GEO”), a U.S. producer of glycine. Chattem Chemicals, Inc.(“Chattem”), the only other U.S. producer of glycine, and CAF International (“CAF”), a U.S. importer ofglycine, participated in the staff conference and filed postconference submissions.

III. DOMESTIC LIKE PRODUCT

A. In General

In determining whether there is a reasonable indication that an industry in the United States ismaterially injured or threatened with material injury by reason of imports of the subject merchandise, theCommission first defines the “domestic like product” and the “industry.”10 Section 771(4)(A) of theTariff Act of 1930, as amended (“the Act”), defines the relevant domestic industry as the “producers as a[w]hole of a domestic like product, or those producers whose collective output of a domestic like productconstitutes a major proportion of the total domestic production of the product.”11 In turn, the Act defines“domestic like product” as “a product which is like, or in the absence of like, most similar incharacteristics and uses with, the article subject to an investigation . . . .”12

The decision regarding the appropriate domestic like product(s) in an investigation is a factualdetermination, and the Commission has applied the statutory standard of “like” or “most similar incharacteristics and uses” on a case-by-case basis.13 No single factor is dispositive, and the Commissionmay consider other factors it deems relevant based on the facts of a particular investigation.14 TheCommission looks for clear dividing lines among possible like products and disregards minor variations.15 Although the Commission must accept the determination of the U.S. Department of Commerce(“Commerce”) as to the scope of the imported merchandise allegedly sold at LTFV,16 the Commission

16 (...continued)688 F. Supp. 639, 644 (Ct. Int'l Trade 1988), aff'd, 865 F.3d 240 (Fed. Cir.), cert. denied, 492 U.S. 919 (1989). 17 Hosiden Corp. v. Advanced Display Mfrs., 85 F.3d 1561, 1568 (Fed. Cir. 1996) (Commission may find a singlelike product corresponding to several different classes or kinds defined by Commerce); Torrington, 747 F. Supp. at748-752 (affirming Commission determination of six like products in investigations where Commerce found fiveclasses or kinds). 18 Acciai Speciali Terni S.p.A. v. United States, 118 F. Supp. 2d 1298, 1304-05 (Ct. Int’l Trade 2000); NipponSteel Corp. v. United States, 19 CIT at 455; Asociacion Colombiana de Exportadores de Flores v. United States, 693F. Supp. 1165, 1169 n.5 (Ct. Int’l Trade 1988) (particularly addressing like product determination); CitrosucoPaulista, S.A. v. United States, 704 F. Supp. 1075, 1087-88 (Ct. Int’l Trade 1988). 19 Glycine from India, Japan, and the Republic of Korea: Initiation of Antidumping Duty Investigations, 72 Fed.Reg. 20816, 20817 (April 26, 2007). 20 The domestic producers indicate that the variable cost of producing glycine is less with the HCN process thanwith the MCA process, although capital costs are greater for the HCN process. E.g., Conference Transcript at 60(Kedrowski).

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determines what domestic product is like the imported articles Commerce has identified.17 TheCommission must base its domestic like product determination on the record in these investigations. TheCommission is not bound by prior determinations, even those pertaining to the same imported products,but may draw upon previous determinations in addressing pertinent like product issues.18

B. Product Description

Commerce’s notice of initiation defines the imported merchandise within the scope of theseinvestigations as follows –

glycine, which in its solid (i.e., crystallized) form is a free-flowing crystalline material. Glycine is used as a sweetener/taste enhancer, buffering agent, reabsorbable amino acid,chemical intermediate, metal complexing agent, dietary supplement, and is used incertain pharmaceuticals. The scope of each of these investigations covers glycine in anyform and purity level. Although glycine blended with other materials is not covered bythe scope of each of these investigations, glycine to which relatively small quantities ofother materials have been added is covered by the scope. Glycine’s chemical compositionis C2H5NO2 and is normally classified under subheading 2922.49.4020 of the HarmonizedTariff Schedule of the United States (HTSUS).

The scope of each of these investigations also covers precursors of dried crystallineglycine, including, but not limited to, glycine slurry (i.e., glycine in a non–crystallizedform) and sodium glycinate. Glycine slurry is classified under the same HTSUSsubheading as crystallized glycine (2922.49.4020) and sodium glycinate is classifiedunder subheading HTSUS 2922.49.8000.19

There are two known processes for the commercial production of glycine: the hydrogen cyanide(“HCN”) process and the monochloroacetic acid (“MCA”) process. The petitioner, GEO, uses the HCNprocess, whereas the other domestic producer, Chattem, uses the MCA process.20 Glycine produced bythe two methods is chemically identical. Sodium glycinate, which is within Commerce’s scope, is aprecursor of glycine in the HCN process, but not in the MCA process. Glycine slurry, the undried formof glycine, is the prior step to production of dried, crystalline glycine under both production methods.

21 The scope of these investigations differs from the scope of the outstanding antidumping duty order on importsof glycine from China, which does not include glycine slurry and sodium glycinate. CR at I-5 n.11; see, e.g.,Continuation of Antidumping Duty Orders: Glycine from China, 65 Fed. Reg. 45752 (July 25, 2000), and 70 Fed.Reg. 69316 (Nov. 15, 2005). 22 The Commission “‘normally does not find separate like products based on different grades of chemicals ormineral products.’” Liquid Sulfur Dioxide from Canada, Inv. No. 731-TA-1098 (Preliminary), USITC Pub. 3826(December 2005) at 6, quoting Bulk Acetylsalicylic Acid (Aspirin) from China, Inv. No. 731-TA-828 (Final),USITC Pub. 3314 at 5-6 (June 2000); Sulfanilic Acid from Hungary and Portugal, Inv. Nos. 701-TA-426 and 731-TA-984-985 (Final), USITC Pub. 3554 (November 2002) at 7 n. 34; Barium Carbonate from China, Inv. No. 731-TA-1020 (Preliminary), USITC Pub. 3561 (November 2002) at 7, n.28. 23 CR at I-8, PR at I-6. 24 CR at I-8 - I-9, PR at I-6 - I-7. 25 CR at I-8 - I-9, PR at I-6 - I-7. 26 CR at I-12, PR at I-9. 27 CR at I-10 - I-11, PR at I-8 - I-9. 28 CR at I-8 - I-9, PR at I-6 - I-7.

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C. Domestic Like Product

Petitioner argues that the Commission should define a single domestic like product, coextensivewith the scope of these investigations; namely, glycine in all its forms and purity levels, including glycineslurry and sodium glycinate. No party objects to this proposed domestic like product definition. At issueare: (1) whether all grades, or purity levels, of dried, crystalline glycine are a single domestic likeproduct, (2) whether sodium glycinate is a separate domestic like product, and (3) whether glycine slurryis a separate domestic like product.21

1. Purity and grade differences

We apply our traditional six-factor analysis in assessing whether different grades or purity levelsof glycine are a single domestic like product or separate domestic like products.22

Physical Characteristics and End Uses. All glycine, regardless of grade, has the same chemicalstructure, differing only by the amount of impurities in the product.23 Because of glycine's chemicalstructure, it has a number of distinctive physical qualities, making it useful as a flavor enhancer, nutrient,buffer, and intermediate in certain production processes.24

Interchangeability. While purity requirements will determine the applications in which theparticular glycine grade may be used, glycine meeting higher purity standards can be used in applicationswith lower purity requirements. Thus, there is some degree of interchangeability among purity levels.25

Channels of Distribution. Channels of distribution are similar for all domestically producedglycine: the vast majority of domestic producers’ shipments, *** percent, are sold to end users, with theremainder sold to distributors.26

Manufacturing Facilities, Production Processes, and Employees. The two domestic glycineproducers use different production processes. However, each uses the same production process, facilities,and employees for all grades of glycine, with the glycine to be used for some pharmaceutical applicationsundergoing additional purifying steps in both processes.27

Producer and Customer Perceptions. All forms of glycine are generally perceived to be the sameproducts. Nevertheless, depending on the application, a purchaser will prefer or require one grade toanother.28

29 E.g., CR/PR at Tables V-1, V-2. 30 E.g., CR at I-8, PR at I-6. 31 E.g., Artists’ Canvas from China, Inv. No. 731-TA-1091 (Final), USITC Pub. 3853 (May 2006) at 6; LiveSwine from Canada, Inv. No. 731-TA-1076 (Final), USITC Pub. 3766 (April 2005) at 8, n. 40; Certain Frozen FishFillets from Vietnam, Inv. No. 731-TA-1012 (Preliminary), USITC Pub. 3533 (August 2002) at 7; Low EnrichedUranium from France, Germany, the Netherlands, and the United Kingdom, Inv. Nos. 701-TA-409-412(Preliminary) and 731-TA-909-912 (Preliminary), USITC Pub. 3388 (January 2001) at 5-6; Uranium fromKazakhstan, Inv. No. 731-TA-539-A (Final), USITC Pub. 3213 (July 1999) at 6, n.23. 32 CR at I-15, PR at I-11. 33 CR at I-15, PR at PR at I-11. 34 CR at I-15, I-16, PR at PR at I-11. GEO explained that it would be possible to use sodium glycinate in some ofthe same applications as glycine; e.g., for enhancing/masking flavor, pH buffering and stabilizing, and metalfinishing. However, the performance of sodium glycinate may be inferior to glycine in those applications and, asnoted, there are ***. GEO’s Postconference Brief, Response to Staff Questions at 1-3. 35 Id. at I-15. Chattem uses a different production process, the MCA process, in which sodium glycinate is not anintermediate product. Id.

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Price. As a result of additional purification standards and production operations, pharmaceuticalgrade glycine generally sells for a higher price than USP grade glycine,29 and USP grade glycinegenerally sells for a higher price than technical grade glycine.30

Conclusion. Because all grades of glycine have common physical characteristics and end uses,share common channels of distribution, and generally share common production processes, facilities, andemployees, we find that all grades of glycine are encompassed in a single domestic like product.

2. Sodium glycinate

We find that sodium glycinate is part of the single domestic like product. Because sodiumglycinate, within the scope of the subject merchandise, is an upstream product in the production ofglycine, we apply the semi-finished product analysis in considering whether it is part of the samedomestic like product as glycine. Under that analysis, we examine: (1) whether the upstream article isdedicated to the production of the downstream article or has independent uses; (2) whether there areperceived to be separate markets for the upstream and downstream articles; (3) differences in the physicalcharacteristics and functions of the upstream and downstream articles; (4) differences in the costs orvalue of the vertically differentiated articles; and (5) the significance and extent of the processes used totransform the upstream into the downstream articles.31

Dedicated production. Sodium glycinate is an intermediate product in the production of glycineusing the HCN production process. The record does not indicate any use for sodium glycinate other thanas an upstream product in the production of glycine.32

Separate markets. Sodium glycinate has no known markets.33 Differences in characteristics and functions. Sodium glycinate is chemically closely related to

glycine. Specifically, sodium glycinate (NaC2H4NO2) contains glycine (C2H5NO2) in its chemistry. While it may be possible to use sodium glycinate in some of the same applications as glycine, sodiumglycinate is primarily or exclusively used to produce glycine.34

Differences in costs or value. Sodium glycinate is not commercially traded and is only consumedin the production of glycine; therefore, market prices do not exist for this product. GEO estimates that theconversion of sodium glycinate into glycine accounted for approximately *** percent of GEO’s total costof glycine production.35

36 Conference Transcript at 30 (Kedrowski). 37 CR at I-16, PR at PR at I-11. 38 Conference Transcript at 29-30 (discussion of drying generally). The record does not include specificinformation on the cost of drying slurry. 39 19 U.S.C. § 1677(4)(A). 40 United States Steel Group v. United States, 873 F. Supp. 673, 681-84 (Ct. Int’l Trade 1994), aff’d, 96 F.3d1352 (Fed. Cir. 1996). 41 19 U.S.C. § 1677(4)(B). 42 GEO argues, however, that assessment of the financial condition of the industry should include separateconsideration of data for GEO and Chattem. GEO Postconference Brief, Economic Analysis attachment at 4. 43 Conference Transcript at 19-21 (Kedrowski); CR/PR at Table III-6.

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Significance of tranformation. Conversion of sodium glycinate into glycine appears not to be acomplicated process. The conversion involves simply “washing the sodium out,”36 through a process inwhich ***.37

Conclusion. We define the single domestic like product as including sodium glycinate, given itsdedication to production of glycine, the absence of a separate market for sodium glycinate, and therelatively small cost and significance of converting sodium glycinate into glycine.

3. Slurry

We also find that glycine slurry is part of the single domestic like product under the semi-finishedproduct analysis. Slurry is glycine in a liquid form, with a chemical formula identical to that of the dried,crystalline form. Slurry is consumed entirely in production of the marketed, dried glycine. Its conversionto dried glycine simply requires drying, which could be energy intensive but is not otherwise a complexprocess.38 Therefore, we find that the single domestic like product includes glycine slurry.

Accordingly, we define the domestic like product as encompassing all glycine, coterminous withthe scope, and thus including glycine in all its forms (slurry and crystalline) and purity levels (USP grade,technical grade, and pharmaceutical grade), and sodium glycinate.

IV. DOMESTIC INDUSTRY

The domestic industry is defined as the “producers as a [w]hole of a domestic like product, orthose producers whose collective output of a domestic like product constitutes a major proportion of thetotal domestic production of the product.”39 In defining the domestic industry, the Commission’s generalpractice has been to include in the industry all domestic production of the domestic like product, whethertoll-produced, captively consumed, or sold in the domestic merchant market.40 Based on our finding thatthe domestic like product is glycine, we find that the domestic industry consists of the two knowndomestic producers of glycine: GEO and Chattem.

We must determine whether any producer of the domestic like product should be excluded fromthe domestic industry pursuant to section 19 U.S.C. § 1677(4)(B). Subsection 1677(4)(B) allows theCommission, if appropriate circumstances exist, to exclude from the domestic industry producers that arerelated to an exporter or importer of subject merchandise or which are themselves importers.41 Exclusionof such a producer is within the Commission’s discretion based upon the facts presented in eachinvestigation.

No party argues for exclusion of any related producers from the domestic industry.42 However,Chattem imported *** pounds of subject merchandise from Japan in 2005 and *** pounds in 2006,43 and,therefore, we must consider whether “appropriate circumstances” exist to exclude Chattem from thedomestic industry on the basis of those importations.

44 Conference Transcript at 19-21 (Kedrowski); CR at III-3 - III-5, PR at III-2. 45 Conference Transcript at 21-22, 36 (Kedrowski), CR at III-15, PR at III-5. 46 CR/PR at Tables III-1, III-2. 47 CR/PR at Tables III-6, IV-4. 48 Id. 49 Chattem opposes the petition in these investigations. CR/PR at Table III-1. The Commission may considerwhether a producer supports or opposes the petition as one factor in deciding whether appropriate circumstancesexist to exclude that producer as a related party, but support or opposition to the petition is not dispositive of thequestion. See e.g., Allied Mineral Products, Inc. v. United States, Slip Op. 04-139 (Ct. Int’l Trade Nov. 12, 2004) at9-10 & n. 5. Under these facts, we do not believe Chattem’s position on the petition outweighs other factorsconsidered. 50 CR/PR at Table VI-2. 51 Consistent with her practice in past investigations and reviews, Vice Chairman Aranoff does not rely onindividual-company income margins in assessing whether a related party has benefitted from importation of subjectmerchandise. Rather, she determines whether to exclude a related party based principally on its ratio of subjectimports to domestic shipments and whether its primary interests lie in domestic production or importation. 52 19 U.S.C. § 1677(7)(G)(i).

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Chattem explains that it reduced its overall glycine production between 2001 and 2004 inresponse to market prices driven down by imports to levels below Chattem’s raw material costs.44 Inearly 2005, Chattem became a distributor of technical grade glycine produced by Showa Denko K.K., aJapanese producer.45

Chattem accounted for *** percent of domestic production in 2004, *** percent in 2005 and ***percent in 2006.46 The volume of Chattem’s imports of subject merchandise from Japan in 2005 wassmall as a share of total glycine imports from Japan that year, *** percent, and relative to Chattem’sproduction that year, *** percent.47 In 2006, however, Chattem’s imports grew to *** percent of totalsubject imports from Japan that year, and to *** percent relative to Chattem’s 2005 production.48 Nonetheless, Chattem’s domestic production continued to *** the volume of its subject import shipmentsover the period of investigation. Therefore, Chattem’s interests appear to be primarily those of a domesticproducer.49

Chattem’s financial performance *** in terms of its ratio of operating income to net sales in 2005and 2006.50 This suggests that Chattem’s domestic operations did not derive benefits from importationsuch that inclusion of its data would inappropriately skew the data of the domestic industry.51 For thesepreliminary determinations, because Chattem did not become a significant importer until 2006, andbecause its inclusion will not skew the data, we find that appropriate circumstances do not exist toexclude Chattem from the domestic industry. However, we will continue to examine this issue in anyfinal phase investigations.

V. CUMULATION

A. In General

For purposes of evaluating the volume and price effects for a determination of material injury byreason of the subject imports, section 771(7)(G)(i) of the Act requires the Commission to cumulatesubject imports from all countries as to which petitions were filed and/or investigations self-initiated byCommerce on the same day, if such imports compete with each other and with domestic like products inthe U.S. market.52 In assessing whether subject imports compete with each other and with the domesticlike product, the Commission has generally considered four factors, including:

53 See Certain Cast-Iron Pipe Fittings from Brazil, the Republic of Korea, and Taiwan, Inv. Nos. 731-TA-278-280(Final), USITC Pub. 1845 (May 1986), aff'd, Fundicao Tupy, S.A. v. United States, 678 F. Supp. 898 (Ct. Int'lTrade), aff'd, 859 F.2d 915 (Fed. Cir. 1988). 54 See, e.g., Wieland Werke, AG v. United States, 718 F. Supp. 50 (Ct. Int'l Trade 1989). 55 The SAA (at 848) expressly states that “the new section will not affect current Commission practice underwhich the statutory requirement is satisfied if there is a reasonable overlap of competition.” SAA at 848 (citingFundicao Tupy, S.A. v. United States, 678 F. Supp. 898, 902 (Ct. Int'l Trade 1988)), aff'd 859 F.2d 915 (Fed. Cir.1988). See Goss Graphic Sys., Inc. v. United States, 33 F. Supp. 2d 1082,1087 (Ct. Int’l Trade 1998) (“cumulationdoes not require two products to be highly fungible”); Wieland Werke, AG, 718 F. Supp. at 52 (“Completelyoverlapping markets are not required.”). 56 Petition at 40-41. 57 See 19 U.S.C. § 1677(7)(G) (ii). 58 The responding importers generally did not compare imports from the subject countries with each other (theonly exception being one importer who reported only that subject imports from India and Japan wereinterchangeable). CR/PR at Table II-2. We intend in any final phase investigations to gather more comprehensiveinformation in this regard. 59 *** that there are no differences that would significantly limit interchangeability within USP grade glycine ortechnical grade glycine, given that glycine is easily qualified for technical grade applications and, by definition, USPgrade glycine meets USP standards. CR at II-7, PR at II-5. *** that interchangeability is limited in the

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(1) the degree of fungibility between the subject imports from different countries andbetween imports and the domestic like product, including consideration of specificcustomer requirements and other quality related questions;

(2) the presence of sales or offers to sell in the same geographic markets of subjectimports from different countries and the domestic like product;

(3) the existence of common or similar channels of distribution for subject importsfrom different countries and the domestic like product; and

(4) whether the subject imports are simultaneously present in the market.53

While no single factor is necessarily determinative, and the list of factors is not exclusive, thesefactors are intended to provide the Commission with a framework for determining whether the subjectimports compete with each other and with the domestic like product.54 Only a “reasonable overlap” ofcompetition is required.55

B. Analysis

Petitioner, GEO, argues that, based on the four factors customarily considered by theCommission, subject imports compete with one another and with domestic glycine, and that, therefore,the Commission should cumulate subject imports.56 The threshold requirement for cumulation is satisfiedbecause GEO filed a petition with respect to each of the three subject countries on the same day. None ofthe statutory exceptions to cumulation is applicable.57

1. Fungibility.

All responding importers reported that domestic glycine and subject imported product werealways interchangeable.58 Domestic producers indicated that, whereas USP grade and technical gradeglycine are easily interchangeable within the grade among sources, pharmaceutical grade glycine mustmeet higher purity and consistency requirements of individual customers and, therefore, pharmaceuticalgrade glycine is less interchangeable among sources.59 We note that USP and technical grades of glycine

59(...continued)pharmaceutical grade, which is tailored to individual customers’ specific requirements. CR at II-7, PR at II-5. Onthat basis, ***. CR at II-7, PR at II-5. For purposes of these preliminary determinations, we attach greater weight to***. 60 Only *** percent of domestic producer shipments, *** percent of U.S. shipments of subject imports fromJapan, and *** of the U.S. shipments of subject imports from India and Korea were of pharmaceutical grade glycine. CR/PR at Table IV-11. Accordingly, limits on interchangeability among sources within the pharmaceutical gradehas only limited significance in assessing fungibility, particularly for purposes of determining overlap ofcompetition. More important in that regard, in 2006, *** percent of the domestic like product, *** percent of U.S.shipments of subject imports from India, *** percent of U.S. shipments of subject imports from Japan, and ***percent of U.S. shipments of subject imports from Korea were of the more highly interchangeable USP gradeglycine. CR/PR at Table III-4, IV-3. Moreover, *** percent of the domestic like product and *** percent of U.S.shipments of the subject imports *** were of technical grade glycine (id.), which also appears to be highlyinterchangeable among sources. 61 E.g., CR/PR at Table V-2. 62 CR/PR at Table IV-2. 63 CR at I-12, PR at I-12.

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accounted for *** percent of domestic producer shipments and *** percent of subject imports in 2006,and therefore find that subject imports are generally interchangeable with the domestic like product andwith each other.60

2. Same Geographical Markets.

There was geographical overlap among the subject merchandise from each subject country andthe domestic like product during the period of investigation. The domestic, Indian, and Japanese productsoverlapped with each other in all regions and with the Korean product in the ***.61

3. Simultaneous Presence.

Imports from each of the subject countries have been present in the U.S. market throughout theperiod of investigation.62

4. Channels of Distribution.

The domestic like product and subject imports are sold through common channels of distribution,that is, through distributors and to end users, with the majority sold to end users.63

5. Conclusion

The record in these preliminary phase investigations consequently indicates that the domestic likeproduct and imports from each of the three subject countries are sufficiently similar in characteristics tosatisfy the fungibility criterion. The criteria concerning channels of distribution, geographic overlap, andsimultaneous presence are clearly satisfied. Accordingly, we cumulate imports from all three subjectcountries for our analysis of reasonable indication of material injury by reason of subject imports.

64 Negligibility is not an issue in this investigation under 19 U.S.C. § 1677(24). The petition was filed on March30, 2007. Subject imports from India accounted for 22.7 percent, subject imports from Japan for 29.6 percent, andsubject imports from Korea for 12.4 percent of total imports of glycine for the most recent 12-month period (March2006 to February 2007) for which data were available that preceded the filing of the petition. CR at IV-12. 65 19 U.S.C. §§ 1671b(a) and 1673b(a). 66 19 U.S.C. § 1677(7)(B)( i). The Commission “may consider such other economic factors as are relevant to thedetermination” but shall “identify each [such] factor . . . [a]nd explain in full its relevance to the determination.” 19U.S.C. § 1677(7)(B). See also Angus Chemical Co. v. United States, 140 F.3d 1478 (Fed. Cir. 1998). 67 19 U.S.C. § 1677(7)(A). 68 19 U.S.C. § 1677(7)(C)(iii). 69 19 U.S.C. § 1677(7)(C)(iii). 70 CR at II-5; PR at II-3.

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I. REASONABLE INDICATION OF MATERIAL INJURY BY REASON OF ALLEGEDLYLESS THAN FAIR VALUE IMPORTS FROM INDIA, JAPAN, AND KOREA64

In the preliminary phase of antidumping or countervailing duty investigations, the Commissiondetermines whether there is a reasonable indication that an industry in the United States is materiallyinjured by reason of the imports under investigation.65 In making this determination, the Commissionmust consider the volume of subject imports, their effect on prices for the domestic like product, and theirimpact on domestic producers of the domestic like product, but only in the context of U.S. productionoperations.66 The statute defines “material injury” as “harm which is not inconsequential, immaterial, orunimportant.”67 In assessing whether there is a reasonable indication that the domestic industry ismaterially injured by reason of subject imports, we consider all relevant economic factors that bear on thestate of the industry in the United States.68 No single factor is dispositive, and all relevant factors areconsidered “within the context of the business cycle and conditions of competition that are distinctive tothe affected industry.”69

For the reasons stated below, we determine that there is a reasonable indication that the domesticindustry producing glycine is materially injured by reason of subject imports from India, Japan, andKorea.

A. Conditions of Competition and the Business Cycle

The following conditions of competition inform our analysis of whether there is a reasonableindication of material injury by reason of subject imports.

1. Demand Conditions

Glycine is an input into the production of many other products, and thus its demand is derivedfrom the demand for those end-use products.70 Glycine is used as a sweetener in foods, pharmaceuticals,personal care products, and animal feed and pet food; as a buffering agent in antacids, analgesics,antiperspirants, cosmetics, and toiletries, and in production of rubber sponge products and fertilizers; as are-absorbable amino acid to treat diarrhea; as a chemical intermediate in a variety of chemical products;as a metal complexing and finishing agent; as a dietary supplement; to improve gastric absorption ofcertain drugs; and in some intravenous uses. The principal end uses of glycine are as an additive in

71 CR/PR at Table I-2 (as revised by INV-EE-047 (May 9, 2007)). Data on the five largest end users of glycineindicate that *** firms that use glycine as an additive in pet food or animal feed accounted for an estimated ***percent of reported U.S. shipments of glycine in 2006, and that *** firms that use glycine as a buffering agent inantiperspirants accounted for an estimated *** percent of reported U.S. shipments of glycine in 2006. Id. Thesepercentages are based on data in U.S. producers’ and U.S. importers’ questionnaire responses in these preliminaryphase investigations. The Commission will collect end use data also from U.S. purchasers in any final phaseinvestigations. 72 Id. 73 CR/PR at Tables IV-4, C-1. Views of producers and importers of demand trends over the period ofinvestigation were mixed, with GEO and two of the responding importers reporting that demand had increased,Chattem and three of the importers reporting that demand had not changed, and three importers reporting thatdemand had declined. Conference Transcript at 63 (Eckman), 64 (Kendrowski); CR at II-5 - II-6, PR at II-4. 74 CR at II-5, PR at II-3. 75 CR at III-1, PR at II-1. Data reported by GEO included data for Hampshire/DOW for the portion of the periodof investigation prior to GEO’s purchase. 76 CR/PR at Table C-1. The industry’s capacity declined from *** pounds in 2004 to *** pounds in 2006. CR/PR at Tables III-2, C-1. Domestic production, after increasing from *** pounds in 2004 to *** pounds in 2005,decreased to *** pounds in 2006. CR/PR at Tables III-6, C-1. 77 CR/PR at Table III-2; CR at III-5, PR at III-2. 78 Conference Transcript at 19-21 (Kedrowski); CR at III-3 - III-5, PR at III-2. 79 Conference Transcript at 21-22, 36 (Kedrowski); CR at III-15, PR at III-5. 80 CR/PR at Table III-4. Chattem currently opposes the petition, explaining that imposition of antidumping dutieswill improve GEO’s performance and permit GEO to modify their facility to serve the pharmaceutical grade sector,which Chattem contends would force Chattem to withdraw from the U.S. glycine business and leave GEO as the

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pet food and animal feed, and as a buffering agent in antiperspirants. 71 A small number of purchasersaccount for a large share of apparent U.S. consumption.72

Apparent U.S. consumption of glycine increased from *** million pounds in 2004 to *** millionpounds in 2005, then decreased to *** million pounds in 2006, reflecting a *** percent overall increase inapparent U.S. consumption over the period of investigation.73

Price changes for glycine will likely have only a small effect on consumption given thatsubstitutes for glycine are limited to a few applications and glycine tends to account for a small share ofthe cost of products in which it is used.74

2. Supply Conditions

During the period of investigation, two domestic producers, GEO and Chattem, accounted for100 percent of U.S. production of glycine. GEO produces glycine using the HCN process at its DeerPark, TX facility, while Chattem produces glycine using the MCA process at its Chattanooga, TN facility. GEO purchased the Deer Park facility from Hampshire Chemical Corporation (“Hampshire”), asubsidiary of DOW Chemicals, Inc. (“DOW”), on November 1, 2005.75

The domestic industry’s capacity to produce glycine declined by *** percent during the period ofinvestigation, while production declined by *** percent.76 GEO accounted for *** of the reduction ofcapacity over the period of investigation.77 As noted above, Chattem reported that it scaled backproduction of the technical and USP grades of glycine between 2001 and 2004 in response to pricingpressures from imports.78 In early 2005, Chattem became a distributor of subject technical grade glycineproduced by Showa Denko K.K., a Japanese producer.79 During the period of investigation, Chattem’sdomestic shipments of technical- and pharmaceutical grade glycine *** while its shipments of USP gradeglycine ***.80

80 (...continued)sole domestic producer. CR/PR at Table III-1 n.2. Correspondence from ***, Chattem, May 2, 2007. However, atthe public conference Chattem had indicated that it supported the petition in relation to glycine imported from India,Japan, and Korea from producers using the MCA process, and that it supported the petition to the extent that theseinvestigations take into account that Chattem’s business partner, Showa Denko K.K., uses the HCN productionprocess and thus has a lower cost structure for the production of its glycine. Conference Transcript at 22(Kedrowski). 81 CR at II-3, PR at II-2. 82 CR/PR at Table III-7 (domestic producers’ inventories as a share of U.S. production increased from *** percentin 2004 to *** percent in 2005, then increased to *** percent in 2006; inventories as a share of U.S. shipmentsincreased from *** percent in 2004 to *** percent in 2005, then increased to *** percent in 2006). 83 CR/PR at Table C-1. 84 CR/PR at Table IV-6. 85 CR/PR at Tables IV-5, C-1. 86 CR/PR at Table IV-5. 87 CR at II-7, PR at II-4. 88 CR at II-7, PR at II-5. 89 CR at II-7, PR at II-5. In any final phase investigations, we will ask parties to comment on the appropriatedefinition of pharmaceutical grade glycine. We intend to gather information on the condition of the pharmaceutical

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Chattem reported selling *** percent of its product from inventories and the remainder producedto order, and GEO reported selling *** percent of its product from inventories and the remainderproduced to order. Five of the 11 responding importers reported selling all product from inventories, withtwo others selling 80 percent or more from inventories. Two importers reported selling all productproduced to order and two others selling 80 percent or more produced to order.81 The domestic industry’sinventories were relatively low as a ratio to production and shipments in 2004 and 2005, then increased in2006 due to ***.82

The domestic industry supplied only a portion of the U.S. market for glycine during the period ofinvestigation with the remainder supplied by imports. Domestic producers’ share of the U.S. marketdeclined steadily from *** percent in 2004 to *** percent in 2006.83 Subject imports’ share of the U.S.market increased from *** percent in 2004 to *** percent in 2006.84 Finally, the U.S. market share heldby nonsubject imports fluctuated during the period examined, and increased modestly from *** percent in2004 to *** percent in 2006.85 Glycine from China, which is subject to an antidumping duty order,accounted for a substantial majority of nonsubject imports in 2005 and 2006.86

3. Substitutability and Other Conditions

The degree of substitution between domestic and imported glycine depends on factors such as thecertified grades produced in each country and relative price, as well as non-price factors such as productquality, consistency, and conditions of sale such as reliability of supply, reliability of delivery, paymentterms, and delivery/lead time.87

As noted above, the record supports the conclusion that glycine is generally interchangeablewithin form or grade, regardless of where it is produced. However, ease of substitution between suppliersmay differ greatly between grades. Non-pharmaceutical grades of glycine could be substituted amongproducers with a fair amount of ease once a producer meets the standard for the specific grade required.88 On the other hand, because pharmaceutical grade glycine requires extremely high purity, consistency, andplant verifications, it may be challenging for purchasers to shift from one supplier to another, at least inthe short term. As a result, Chattem reported that competition from imports in pharmaceutical gradeglycine was not significant.89

89 (...continued)segment of the market, and the performance of domestic producers in that segment. 90 CR at V-4, PR at V-3. GEO reported that its contracts contain meet-or-release provisions, while the importer,CAF, contends that its contracts do not contain meet-or-release provisions. Conference Transcript at 17, 37(Jackson), 86 (Frey). We intend to gather additional information on the durations and terms of domestic producers’and importers’ contracts in any final phase investigations. 91 The Commission has made two modifications to official Commerce import statistics using proprietary Customsdata to account for misclassification of certain entries. First, material imported from the United Kingdom under thestatistical reporting number 2922.49.4020 was reclassified as subject imports from Japan to reflect the fact that thismaterial was improperly classified as having actually been produced in the United Kingdom. Second, glycineimported *** from India that had been improperly classified under statistical reporting number 2922.49.1000 ineach year of the period of investigation was included in the import totals. CR at IV-3 - IV-4, PR at IV-2.

We note that Chattem alleges that imports included in Commerce data as being of subject-country originmay, in fact, have been of Chinese origin. Conference transcript, pp. 71-72 (Kedrowski). See Chattem’spostconference submission at 2 (providing estimates of U.S. imports from the subject countries and the UnitedKingdom during the first quarter of 2007 that were alleged to be transshipped glycine of Chinese origin). However,unlike the adjustments noted above, we have no information other than Chattem’s allegations that would allow us toconfirm transshipments of Chinese-origin glycine during the period of investigation or to adjust the Commerce datain that regard.

If information about other possible revisions to the Commerce statistics comes to light in any final phaseinvestigations, we will consider those adjustments at the appropriate time. 92 19 U.S.C. § 1677(7)(C)(i). 93 CR/PR at Tables IV-2, C-1. Chattem’s imports of subject merchandise accounted for *** percent of totalsubject imports in 2004 and *** percent in 2005. CR/PR at Tables III-6, IV-2. 94 CR/PR at Tables IV-5, C-1. Subject imports as a ratio to U.S. production increased from 36.2 percent in 2004to 56.9 percent in 2005, and then to 77.5 percent in 2006. CR/PR at Table IV-6.

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GEO reported selling *** percent of its product using long-term contracts and *** percent on aspot basis. Chattem reported that it does not sell on a contract basis but that it typically had a long-termrelationship with many of its purchasers. Of 11 responding importers, three reported selling mostly underlong-term contracts, three sold mainly using short-term contracts, and five sold all product in spot sales.90

B. Volume of Subject Imports 91

Section 771(7)(C)(i) of the Act provides that the “Commission shall consider whether the volumeof imports of the merchandise, or any increase in that volume, either in absolute terms or relative toproduction or consumption in the United States, is significant.”92

The volume of cumulated subject imports of glycine increased significantly over the period ofinvestigation, both in absolute terms and relative to consumption and production in the United States. The volume of subject imports, measured by quantity, doubled over the period of investigation, increasingfrom 3.2 million pounds in 2004 to 5.6 million pounds in 2005, then to 6.4 million pounds in 2006.93 Theshare of the quantity of U.S. apparent consumption held by subject imports also increased over the periodof investigation, from *** percent in 2004 to *** percent in 2005, and then to *** percent in 2004.94

The volume of nonsubject imports increased overall during the period of investigation, both inabsolute terms and relative to U.S. consumption, but those increases were much smaller than those of the

95 The volume of nonsubject imports, measured by quantity, increased by 25.4 percent over the period ofinvestigation, from 2.0 million pounds in 2004 to 2.2 million pounds in 2005, then to 2.6 million pounds in 2006. CR/PR at Table IV-4, C-1. The share of the quantity of U.S. apparent consumption held by nonsubject importsincreased irregularly from *** percent in 2004, to *** percent in 2005, then to *** percent in 2006. CR/PR atTables IV-5, C-1. 96 There is limited information on the record regarding the role of nonsubject imports of glycine in the U.S.market. In any final phase investigations, we will seek information on the role of nonsubject imports of glycine inthe U.S. market. We invite parties to comment in any final phase investigations on whether the recent decision bythe U.S. Court of Appeals for the Federal Circuit, Bratsk Aluminum Smelter v. United States, 444 F.3d 1369 (Fed.Cir. 2006), is applicable to the facts of these investigations. The Commission also invites parties to comment onwhat additional information the Commission should collect to address the issues raised by the Court and how thatinformation should be collected, and to identify which of the various nonsubject sources should be the focus ofadditional information gathering by the Commission in any final phase investigations. 97 Chairman Pearson and Commissioner Okun do not join the preceding footnote. The U.S. Court of Appeals forthe Federal Circuit did not address the application of its mandate in Bratsk Aluminum Smelter v. United States, 444F.3d 1369 (Fed. Cir. 2006), to preliminary investigations. In that case the Court indicated that, in cases involvingcommodity products in which imports from non-subject countries are price-competitive and are a significant factorin the U.S. market, in order to establish a causal link between subject imports and material injury the Commissionmust evaluate whether the non-subject imports would replace subject imports and thereby eliminate the benefit to thedomestic industry of an antidumping or countervailing duty order.

The legal standard for preliminary antidumping and countervailing duty determinations requires theCommission to determine, based upon the information available at the time of the preliminary determination,whether there is a reasonable indication that a domestic industry is materially injured or threatened with materialinjury by reason of the allegedly unfairly traded imports. 19 U.S.C. §§ 1671b(a), 1673b(a) (2000). Thus, ChairmanPearson and Commissioner Okun conclude that they must conduct a Bratsk analysis as they would any other type ofcausation analysis in a preliminary investigation. See Separate and Additional Views of Chairman Daniel R.Pearson and Commissioner Deanna Tanner Okun Concerning Bratsk Aluminum v. United States. 98 The share of the quantity of U.S. apparent consumption held by the domestic industry decreased steadily from*** percent in 2004 to *** percent in 2005, then to *** percent in 2006. CR/PR at Tables IV-5, C-1. 99 19 U.S.C. § 1677(7)(C)(ii).

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subject imports.95 96 97 In addition, the absolute and relative increase in non-subject import volume overthe period of investigation was small relative to the decline in U.S. producer’s U.S. shipments.98 Thus,subject imports gained market share largely at the expense of the domestic industry.

For the foregoing reasons, we find for the purposes of the preliminary phase of theseinvestigations that both the volume and increase in volume of subject imports were significant during theperiod of investigation, both in absolute terms and relative to consumption and production in the UnitedStates.

C. Price Effects of the Subject Imports

Section 771(7)(C)(ii) of the Act provides that, in evaluating the price effects of the subjectimports, the Commission shall consider whether –

(I) there has been significant price underselling by the imported merchandise ascompared with the price of domestic like products of the United States, and

(II) the effect of imports of such merchandise otherwise depresses prices to a significantdegree or prevents price increases, which otherwise would have occurred, to a significantdegree.99

100 See CR at II-7 - II-11, PR at II-5 - II-7. 101 CR at V-4, PR at V-4. 102 ***. In total, 11 importers provided price data. Four of the importers reported price data for product 2 fromIndia. Seven importers reported price data for product from Japan--four of these imported product 2, two importedproduct 3, and one imported product 1. One importer provided price data for product 2 from Korea. CR at V-5, PRat V-4. 103 CR/PR at Tables IV-3 and V-1 - V-3. For product 2, the subject imports undersold the domestic like productin 30 of 36 quarterly comparisons. CR/PR at Table V-2. Products 1 and 3 accounted for considerably smallervolumes of subject imports. The subject imports undersold the domestic like product in none of the 9 quarterlycomparisons for product 1, and in 3 of 7 quarterly comparisons for product 3. CR/PR at Tables V-1, V-3. 104 We note that the price levels of the two domestic producers differed substantially. In any final phaseinvestigations we intend to explore the significance of these differences for price competition in the U.S. glycinemarket. 105 CR/PR at Tables V-1 - V-3. 106 CR/PR at Table V-2. 107 CR/PR at Tables VI-1, C-1. 108 During a time of significantly increasing subject import levels in 2005 at prices that significantly undersold thedomestic product, the domestic industry was able to lower its costs. Direct labor unit costs declined from $*** perpound in 2004 to $*** per pound in 2005; factory overhead costs declined from $*** per pound in 2004 to $*** perpound in 2005; and SG&A expenses declined from $*** per pound in 2004 to $*** per pound in 2005. These costimprovements were offset somewhat in 2005 by increasing raw materials costs, which rose from $*** per pound in2004 to $*** per pound in 2005. These overall cost declines directly contributed to an improvement in the domesticindustry’s financial performance in 2005, as reflected in its operating income to net sales ratio of *** percent, ascompared with *** percent in 2004. CR/PR at Tables VI-3, C-1.

However, as raw materials costs increased even further in 2006, up $*** per pound to $*** per pound, andas the domestic industry was unable to continue lowering its direct labor costs, factory overhead costs, and SG&Aexpenses, which only cumulatively declined $*** per pound in 2006, the domestic industry was unable to compete

(continued...)17

As explained in the discussion of cumulation and conditions of competition, there is a moderateto high degree of substitutability between the domestic like product and subject imports, though factorsother than price enter into purchasing decisions.100

In these investigations, U.S. producers and importers provided quarterly pricing data for threegrades of glycine: pharmaceutical grade (product 1), USP grade (product 2), and technical grade (product3).101 By quantity, pricing data reported by responding firms accounted for *** percent of reported U.S.producers’ shipments of glycine, *** percent of subject imports of glycine from India, *** percent ofsubject imports from Japan, and *** percent of subject imports from Korea for the January 2004 toDecember 2006 period.102

Subject imports undersold the domestic like product in 33 of 52 quarterly comparisons, withmargins of underselling ranging from 0.1 percent to 20.3 percent.103 For purposes of these preliminarydeterminations, we find that there has been significant underselling of the domestic like product bysubject imports.104

We have also considered movements in glycine prices over the period of investigation. TheCommission’s pricing data show an overall increase in prices for the three domestic products over theperiod of investigation.105 However, U.S. prices for product 2, which accounts for 80 to 85 percent of theU.S. market, declined from 2005 to 2006.106 Additionally, the domestic industry’s unit cost of goods sold(“COGS”) increased over the period of investigation, and the ratio of COGS to net sales, whilefluctuating during the period, rose between 2005 and 2006 by *** percent.107 These data indicate that,although the domestic industry’s prices increased, the domestic producers ***, particularly in 2006. Thisevidence indicates price suppression in the form of a cost-price squeeze due in part to the subject importsin 2006.108 Evidence of some confirmed lost sales provides additional support for our finding that subject

108 (...continued)with the ever-increasing levels of lower-priced subject imports in 2006 by continuing to lower costs and was unableto raise its prices to cover its increased costs because of the significant underselling. CR/PR at Table VI-3. As aresult, the domestic industry’s operating income to net sales ratio worsened, to *** percent in 2006. CR/PR at TableC-1. 109 The petitioner provided lost sales allegations totalling $***. CR at V-14, PR at V-5. The Commissionconfirmed $*** of the alleged lost sales over the period of investigation. CR at V-14-V-17, PR at V-5 - V-6; CR/PRat Table V-6. The alleged lost sale regarding *** was not confirmed, but ***. CR at V-17, PR at V-6. We noteconflicting reporting on the country of origin of glycine relating to one lost sales allegation. CR at V-16 n.3, PR atV-6. We intend to seek more information to resolve this and any related inconsistencies in any final phase of theseinvestigations. 110 CR/PR at Table V-2. 111 In its notice of initiation, Commerce estimated the dumping margins for imports of subject glycine at between5.67 to 121.62 percent for India, 70.21 to 280.57 percent for Japan, and 138.37 to 138.83 percent for Korea. 72 Fed.Reg. 20816, April 26, 2007. 112 19 U.S.C. § 1677(7)(C)(iii); see also SAA at 851 and 885 (“In material injury determinations, the Commissionconsiders, in addition to imports, other factors that may be contributing to overall injury. While these factors, insome cases, may account for the injury to the domestic industry, they also may demonstrate that an industry is facingdifficulties from a variety of sources and is vulnerable to dumped or subsidized imports.”). SAA at 885. 113 19 U.S.C. § 1677(7)(C)(iii); see also SAA at 851, 885; Live Cattle from Canada and Mexico, Inv. Nos. 701-TA-386, 731-TA-812-813 (Preliminary), USITC Pub. 3155 (Feb. 1999) at 25 n.148. 114 U.S. production increased from *** in 2004 to *** in 2005 and then declined to *** in 2006. CR/PR at TablesIII-2 and C-1.

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imports have suppressed prices to a significant degree.109 Also, there is some evidence of price depressionas domestic prices for the main glycine product (USP grade, product 2) fell substantially during 2005 and2006, as subject imports were increasing in those years.110 For purposes of the preliminary phase of theseinvestigations, however, we have not found that subject imports have depressed domestic prices to asignificant degree.

For the foregoing reasons, we find for purposes of the preliminary phase of these investigationsthat there has been significant underselling by subject imports and that such imports have prevented priceincreases, which otherwise would have occurred, to a significant degree. Thus, we find that subjectimports have had significant adverse effects on prices for the domestic like product.

D. Impact of the Subject Imports on the Domestic Industry111

Section 771(7)(C)(iii) of the Act provides that the Commission, in examining the impact of thesubject imports on the domestic industry, “shall evaluate all relevant economic factors which have abearing on the state of the industry.”112 These factors include output, sales, inventories, ability to raisecapital, research and development, and factors affecting domestic prices. No single factor is dispositiveand all relevant factors are considered “within the context of the business cycle and conditions ofcompetition that are distinctive to the affected industry.”113

We have examined the performance indicators in the trade and financial data for the domesticindustry producing glycine. These data indicate declining overall trends, although some indicators havefluctuated during the period examined. U.S. production, production capacity, capacity utilization,shipments, and net sales quantity and value all declined from 2004 to 2006. U.S. production of glycineincreased from 2004 to 2005, but declined *** percent in 2006 for an overall decline of *** percent from2004 to 2006.114 Industry capacity declined from 2004 to 2005 and was unchanged from 2005 to 2006,for an overall decline of *** from 2004 to 2006. Capacity utilization increased from *** percent in 2004

115 CR/PR at Tables III-2 and C-1. 116 U.S. shipments declined from *** in 2004 to *** in 2005 and to *** in 2006. CR/PR at Table C-1. 117 CR/PR at Table C-1. 118 CR/PR at Tables IV-6 and C-1. 119 CR/PR at Table IV-6. 120 CR/PR at Table C-1. It is not clear whether the this inventory buildup was *** (GEO’s Postconference Brief,Responses to Staff Questions at 21), or the result of other factors. We intend to consider this issue further in anyfinal phase investigations. 121 CR/PR at Table C-1. However, ***, unit labor costs ***. Id. 122 Unit sales values increased from $*** in 2004 to $*** in 2006, and productivity (pounds per hour) increasedfrom *** in 2004 to *** in 2006. CR/PR at Table C-1. 123 CR/PR at Tables VI-3, C-1. 124 CR/PR at Table C-1. 125 U.S. importers asserted that, during the period of investigation, GEO and/or its predecessor firm,Hampshire/DOW, lost business because they were unable to meet customer demand due to plant shutdowns, qualityproblems, and problems such as short shipping, unreliable deliveries, allocation, and denial of supply (abrogatedcontracts). It was also alleged that GEO’s customers are hesitant to concentrate all their business through a solesupplier of glycine. GEO *** contracts over the period of investigation and contends that, while Hampshire/DOWhad a poor record regarding reliability of service, GEO has significantly improved customer service since itpurchased the Hampshire/DOW facility in November 2005. CR at III-12, PR at III-4 - III-5. We note that negativetrends in the data occurred even after GEO replaced Hampshire/DOW as a producer, even though deliveries andshipments became much more reliable. CR/PR at Table III-5, Figure III-5.

We note that an importer reported that GEO, more recently, in 2007, has asked its customers to wait threemonths for product. GEO responded that ***. GEO’s Postconference Brief, Responses to Staff Questions at 21. Inany final phase investigations, we will gather further information on the domestic industry’s delivery performance,especially in 2007.

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to *** percent in 2005, then decreased to *** percent in 2006.115 Domestic producers’ U.S. shipments ofglycine increased from 2004 to 2005, but declined *** in 2006 for an overall decline of *** percent from2004 to 2006.116 Net sales volume followed production and shipment trends, increasing from 2004 to2005, but declining *** in 2006, for an overall decline of *** percent from 2004 to 2006.117

As apparent U.S. consumption increased overall by *** from 2004 to 2006, imported subjectproduct gained U.S. market share at the expense domestic producers.118 Domestic producers’ share of theU.S. market declined from *** percent in 2004 to *** percent in 2006, while subject imports’ shareincreased from *** percent in 2004 to *** percent in 2006.119 Domestic producers’ inventories increasedby *** percent over the period of investigation and rose as a share of U.S. shipments from *** percent in2004 to *** percent in 2006.120

The average number of the industry’s production related workers declined *** percent over theperiod of investigation, from *** in 2004 to *** in 2006 and hours worked declined *** percent, from*** in 2004 to *** in 2006, while hourly wages increased *** percent, from $*** in 2004 to $*** in2006.121

Despite increased prices and improvements in the industry’s productivity over the period ofinvestigation,122 unit raw material costs rose sharply, from $*** in 2004 to $*** in 2005 and then to $***in 2006, pushing total unit costs upward.123 The industry reported *** in each year of the periodexamined. The operating *** were $*** in 2004, $*** in 2005, and $*** in 2006. The industry’s ratioof operating *** to net sales was *** percent in 2004, *** percent in 2005, and *** percent in 2006.124 125 For purposes of the preliminary phase of these investigations, we conclude that subject importshad an adverse impact on the condition of the domestic industry during the period of investigation. Inparticular, we find that the absolute and relative volume of subject imports are significant, that subject

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imports have gained market share at the expense of the domestic industry, that they have undersold thedomestic product, and have suppressed domestic prices to a significant degree. The suppressed domesticprices, combined with the pattern of consistent underselling, have led to declines in the domesticindustry’s financial performance over the period of investigation.

CONCLUSION

For the reasons stated above, we find that there is a reasonable indication that the domesticindustry producing glycine is materially injured by reason of subject imports of glycine from India, Japan,and Korea that allegedly are sold in the United States at less than fair value.

1 No. 05-1213 (Fed. Cir. Apr. 10, 2006), Slip Op. at 6, quoting Gerald Metals, Inc. v. United States, 132 F.3d 716,722 (Fed. Cir. 1997). The Commission filed a petition for rehearing en banc, which the Court denied on July 24,2006. The Court’s mandate was issued on August 7, 2006.

2 Commissioner Okun did not participate in the underlying investigation nor the subsequent litigation.

3 Slip Op. at 2, 9-11.

4 H.R. Doc. No. 103-316, Vol. I (1994) at 851-52 (“SAA”); Taiwan Semiconductor Industry Ass’n v. UnitedStates, 266 F.3d at 1339, 1345 (Fed. Cir. 2001).

5 Slip op. at 9, 12.

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SEPARATE AND ADDITIONAL VIEWS OF CHAIRMAN DANIEL R.PEARSON AND COMMISSIONER DEANNA TANNER OKUN CONCERNING

BRATSK ALUMINUM V. UNITED STATES

I. Legal Issues Concerning Bratsk Aluminum Smelter v. United States

In the recent case of Bratsk Aluminum Smelter et al. v. United States, 444 F.3d 1369 (Fed. Cir.2006) (“Bratsk”), the Court of Appeals for the Federal Circuit reaffirmed that the requisite causal link tosubject imports is not demonstrated if such imports contributed only “‘minimally or tangentially to thematerial harm.’”1 2 Applying that standard to an investigation involving a commodity product, i.e.,silicon metal, and the significant presence of non-subject imports, the Court held that the Commission hadnot sufficiently explained whether non-subject imports simply would have replaced subject importsduring the period of investigation had an antidumping order been in place and continued to cause injuryto the domestic industry.3

As a threshold matter, it is not immediately clear how the Commission should interpret the Bratskopinion in terms of its effect on our analysis of causation in Title VII investigations. At a minimum, wecan discern at least two possible interpretations which differ substantially: (1) that Bratsk mandatesapplication of an additional test apparently not contemplated by the statute (the so-called“replacement/benefit test”), and (2) that Bratsk is a further development of the causation approachprescribed by Gerald Metals.

A. Separate Causation Analysis – Replacement/Benefit Test

The statute sets forth specific factors for the Commission to consider in analyzing the volume,price effects and impact of subject imports. 19 U.S.C. § 1677(7). The Uruguay Round Agreements ActStatement of Administrative Action (“SAA”) explains further that in analyzing causation the Commissionmust examine factors other than subject imports to ensure that it is not attributing injury from thesesources to the subject imports, but is not required to isolate the injury caused by other factors from injurycaused by unfair imports.4 Beyond this, the statute does not provide any further limitations on how theCommission’s causation analysis shall be conducted.

The Court’s decision, however, states that the Commission must perform an additional “specific”causation analysis in the form of a replacement/benefit test. Using somewhat varying phrasing, the Courtstated that the Commission must determine “whether non-subject imports would have replaced subjectimports without any beneficial effect on domestic producers,” must “explain why the elimination ofsubject imports would benefit the domestic industry instead of resulting in the non-subject imports’replacement of the subject imports’ market share without any beneficial impact on domestic producers,”and must explain “why the non-subject imports would not replace the subject imports and continue tocause injury to the domestic industry.”5

6 SAA at 851-52, 885, 889-90. The Commission has indicated that the possibility that an order might not beeffective does not preclude a finding of present material injury. The Commission also has concluded that the statutedoes not provide for the Commission to perform an additional injury test to predict the future effectiveness of importrelief:

{W}e note that nothing in the statute or case law requires (or allows) us to consider the likelyeffectiveness of a dumping order in making our injury determination. The possibility that non-subject imports will increase in the future after an antidumping order is imposed is . . . not relevantto our analysis of whether subject imports are currently materially injuring the industry.

Wooden Bedroom Furniture From China, Inv. No. 731-TA-1058 (Final), USITC Pub. 3743, n.222 (Dec. 2004).

7 Huaiyin Foreign Trade Corp. v. United States, 322 F.3d 1369, 1380 (Fed. Cir. 2003).

8 The Commission set out in detail its objections to the Court’s decision in its petition for rehearing to the FederalCircuit. See Petition for Rehearing en Banc (May 25, 2006), Bratsk Aluminum Smelter et al. v. United States, 444F.3d 1369 (Fed. Cir. 2006)(No. 05-1213) (petition denied July 24, 2006). As noted above, Commissioner Okun didnot participate in that proceeding.

9 While it is not an issue in these investigations, it is unclear whether the Court intended its approach to apply toanalyses of threat of material injury, or only to analyses of present material injury. Given that one of the Court’sformulations of the standard is framed in terms of likely future events, we have interpreted the Court’s decision asapplying both to the context of present injury and threat of injury.

10 Gerald Metals, 132 F.3d at 722.

11 Slip op. at 5.

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Such a “replacement/benefit” test is not among the statutory factors Congress has required theCommission to consider. The statutory scheme contemplates that subject imports may remain in the U.S.market after an order is imposed and even that the industry afterward may continue to suffer materialinjury.6 Thus, the decision in Bratsk misconstrues the purpose of the antidumping and countervailingduty laws, which is not to bar subject imports from the U.S. market or award subject import market shareto U.S. producers, but instead to “level competitive conditions” by imposing a duty on subject imports ata level to offset the amount of dumping or subsidization and thus enabling the industry to compete againstfairly traded imports.7 It is not uncommon for subject imports to remain in the U.S. market in significantquantities even after the issuance of an antidumping or countervailing duty order, as shown by thehundreds of millions of dollars in antidumping and countervailing duties collected every year.

Bratsk, therefore, appears to require that the Commission apply an extra-statutory causation testwith respect to non-subject imports and to determine that the domestic industry will benefit from theantidumping duty or countervailing duty order. We respectfully disagree with the Court that such acausation analysis is legally required.8 However, given that the Federal Circuit’s mandate has now beenissued and the decision has become binding precedent, we discuss infra our interpretation of the Bratskstandard and perform the analysis based on the record in these preliminary investigations.9

B. Gerald Metals Causation Analysis

Alternatively, we also find support for interpreting the Bratsk decision to be reminding theCommission of its obligation under Gerald Metals that the Commission may not satisfy the “by reason of”causation requirement by showing that subject imports contributed only “minimally or tangentially to thematerial harm.”10

This may be a reasonable interpretation of the Bratsk decision as the Court noted that the “solepoint of contention in this appeal is whether the Commission established that the injury to the domesticindustry was ‘by reason of’ the subject imports.”11 In explaining its conclusion, the Court emphasized

12 Slip op. at 5.

13 Slip op. at 6-9.

14 Slip op. at 9.

15 Slip op. at 10.

16 Slip op. at 9.

17 19 U.S.C. § 1673d(b).

18 S. Rep. No. 249, 96th Cong., 1st Sess. 46-47 (1979).

19 S. Rep. No. 249, 96th Cong., 1st Sess. 74 (1979); H.R. Rep. No. 317, 96th Cong., 1st Sess. 46-47.

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that the Commission had “dismissed” Gerald Metals as being factually distinguishable,12 extensivelyexplained its holdings in Gerald Metals and Taiwan Semiconductor,13 and noted that the underlyinginvestigation in Bratsk “revealed the same conditions that triggered the additional causation inquiry inGerald Metals and Taiwan Semiconductor.”14 Further, the Court noted that

Gerald Metals thus requires the Commission to explain why – notwithstanding thepresence and significance of the non-subject imports – it concluded that the subjectimports caused material injury to the domestic industry. While there may be support forthe Commission’s ultimate determination of material injury in the record here, we findthat the Commission did not sufficiently explain its decision in this regard.15

Therefore, the Court may not have been creating a new extra-statutory causation test, but ratherwas simply reminding the Commission of its existing obligation under Federal Circuit precedent. In otherwords, the Bratsk Court’s relatively short discussion of the underlying determination may not haveestablished a new and rigid replacement/benefit test. Rather, the Court may have discussed the triggeringfactors (i.e., commodity product and price-competitive non-subject imports) and the replacement/benefitfactors (i.e., whether non-subject imports would have replaced the subject imports without any beneficialeffect on domestic producers)16 as a reminder that the Commission, before it makes an affirmativedetermination, must satisfy itself that it has not attributed material injury to factors other than subjectimports.

The statute requires the Commission to determine whether the domestic industry is “materiallyinjured by reason of” the unfairly traded imports.17 Thus, the Commission must evaluate the effects of theunfairly traded imports on the domestic industry in order to determine if those imports are causingmaterial injury. In most investigations, there are other economic factors that also may be causing injuryto the domestic industry. The statute’s legislative history states that the Commission “will considerinformation which indicates that harm is caused by factors other than less-than-fair-value imports.”18 While the statute is clear that the Commission is not to weigh or prioritize the factors that areindependently causing material injury,19 the Commission